Pandering to Persuade

2013 ◽  
Vol 103 (1) ◽  
pp. 47-79 ◽  
Author(s):  
Yeon-Koo Che ◽  
Wouter Dessein ◽  
Navin Kartik
Keyword(s):  
Strategic Communication ◽  
Expected Value ◽  
Comparative Statics ◽  
Outside Option ◽  
Optimal Mechanism ◽  
Option Values

An agent advises a principal on selecting one of multiple projects or an outside option. The agent is privately informed about the projects' benefits and shares the principal's preferences except for not internalizing her value from the outside option. We show that for moderate outside option values, strategic communication is characterized by pandering: the agent biases his recommendation toward “conditionally better-looking” projects, even when both parties would be better off with some other project. A project that has lower expected value can be conditionally better-looking. We develop comparative statics and implications of pandering. Pandering is also induced by an optimal mechanism without transfers. (JEL D23, D82)

Informational Herding, Optimal Experimentation, and Contrarianism

2021 ◽  
Author(s):  
Lones Smith ◽  
Peter Norman Sørensen ◽  
Jianrong Tian
Keyword(s):  
Social Learning ◽  
Bayesian Learning ◽  
Comparative Statics ◽  
Value Functions ◽  
Monotone Comparative Statics ◽  
Public Beliefs ◽  
Optimal Mechanism ◽  
Optimal Dynamic ◽  
Informational Externalities

Abstract In the standard herding model, privately informed individuals sequentially see prior actions and then act. An identical action herd eventually starts and public beliefs tend to “cascade sets” where social learning stops. What behaviour is socially efficient when actions ignore informational externalities? We characterize the outcome that maximizes the discounted sum of utilities. Our four key findings are: (a) Cascade sets shrink but do not vanish, and herding should occur but less readily as greater weight is attached to posterity. (b) An optimal mechanism rewards individuals mimicked by their successor. (c) Cascades cannot start after period one under a signal logconcavity condition. (d) Given this condition, efficient behaviour is contrarian, leaning against the myopically more popular actions in every period. We make two technical contributions: As value functions with learning are not smooth, we use monotone comparative statics under uncertainty to deduce optimal dynamic behaviour.We also adapt dynamic pivot mechanisms to Bayesian learning.

scholarly journals Optimal Project Selection Mechanisms

2014 ◽  
Vol 6 (3) ◽  
pp. 227-255 ◽  
Author(s):  
Talia Bar ◽  
Sidartha Gordon
Keyword(s):  
Private Information ◽  
Limited Liability ◽  
Project Selection ◽  
Project Managers ◽  
Outside Option ◽  
Optimal Mechanism ◽  
Optimal Value ◽  
Ex Ante ◽  
The Cost ◽  
Selection Mechanisms

We study mechanisms for selecting up to m out of n projects. Project managers' private information on quality is elicited through transfers. Under limited liability, the optimal mechanism selects projects that maximize some function of the project's observable and reported characteristics. When all reported qualities exceed their own project-specific thresholds, the selected set only depends on observable characteristics, not reported qualities. Each threshold is related to (i) the outside option level at which the cost and benefit of eliciting information on the project cancel out and (ii) the optimal value of selecting one among infinitely many ex ante identical projects. (JEL D21, D82, O32)

scholarly journals Countering the winner's curse: Optimal auction design in a common value model

2020 ◽  
Vol 15 (4) ◽  
pp. 1399-1434
Author(s):  
Dirk Bergemann ◽  
Benjamin Brooks ◽  
Stephen Morris
Keyword(s):  
Expected Value ◽  
Winner's Curse ◽  
English Auctions ◽  
Auction Design ◽  
Winner’S Curse ◽  
Common Value ◽  
Optimal Mechanism ◽  
Optimal Auction ◽  
Value Model ◽  
Posted Price

We characterize revenue maximizing mechanisms in a common value environment where the value of the object is equal to the highest of the bidders' independent signals. If the revenue maximizing solution is to sell the object with probability 1, then an optimal mechanism is simply a posted price, namely, the highest price such that every type of every bidder is willing to buy the object. If the object is optimally sold with probability less than 1, then optimal mechanisms skew the allocation toward bidders with lower signals. The resulting allocation induces a “winner's blessing,” whereby the expected value conditional on winning is higher than the unconditional expectation. By contrast, standard auctions that allocate to the bidder with the highest signal (e.g., the first‐price, second‐price, or English auctions) deliver lower revenue because of the winner's curse generated by the allocation. Our qualitative results extend to more general common value environments with a strong winner's curse.

Effects of Cooking Oil Subsidy Removals on Related Markets in Malaysia: A Comparative Static, Multicommodity, Multi Stage Production Approach

2011 ◽  
Author(s):  
Jamal Othman ◽  
Yaghoob Jafari
Keyword(s):  
Equilibrium Model ◽  
Comparative Statics ◽  
Partial Equilibrium ◽  
Cooking Oil ◽  
Multi Stage ◽  
Supply Factor ◽  
Partial Equilibrium Model ◽  
Factor Markets ◽  
Input Markets ◽  
Production Approach

Malaysia is contemplating removal of most of her subsidy support measures including subsidies on cooking oil which is largely palm oil based. This paper aims to examine the effects of cooking oil subsidy removals on the competitiveness of the oil palm subsector and related markets. This is done by developing and applying a comparative static, multi-commodity, partial equilibrium model with multi-stages of production function for the Malaysian perennial crops subsector which explicitly links different stages of production, primary and intermediate input markets, trade, and policy linkages. Results partly suggest that export of cooking oil will increase by 0.2 per cent due to a 10 per cent cooking oil subsidy reduction, while domestic output of cooking oil may eventually see a net decline of 1.97 per cent. The results clearly point out that the effect of reducing cooking oil subsidies is relatively small at the upstream levels and therefore it only induces minute effects on factor markets. Consequently, the market for other agricultural crops is projected to change very marginally.   Keywords: Multicomodity, comparative statics, partial equilibrium model, output supply-factor markets linkages, effects of cooking oil subsidy removals.

Sign in / Sign up

Export Citation Format

Share Document